paying off house

Momof2kids · #1 09/02/10, 09:48 AM

I have the money now to pay off house( 50,000) But my husband thinks we should put it in the safe and not pay off the house. He says that all house should have some type of morage. WHY?

jill.costello · #2 09/02/10, 09:50 AM

"in the safe"????? Why not put it in an interest-earning account???

cider · #3 09/02/10, 09:50 AM

If it were me, I'd pay it off. Debt makes me nuts!

Why not split it? Pay half and sock the rest away in the safe.

Tana Mc · #4 09/02/10, 09:50 AM

Introduce him to Dave Ramsey. I'd pay the house off soooooooo fast. Then save what you morgage payment has been....

Txrider · #5 09/02/10, 09:55 AM

Quote:

Originally Posted by Momof2kids

I have the money now to pay off house( 50,000) But my husband thinks we should put it in the safe and not pay off the house. He says that all house should have some type of morage. WHY?

Your hubby is nuts... The only reason that would make any sense at all is to keep a high credit score, but that is far from enough reason.

There is a line of logic that says if you can put that money somewhere where it draws more interest than the interest on your mortgage you are better off earning the interest, but that's not easy to find in this economy.

That said, I doubt I would put all 50k on the house if that's all I had and all I owed. I would put some back in an interest bearing account for an emergency fund and not touch it, and put the rest directly to principal on the mortgage.

If you have several thousand besides this 50k, then I would pay it off now.

momof2birds · #6 09/02/10, 09:55 AM

Quote:

Originally Posted by Tana Mc

Introduce him to Dave Ramsey. I'd pay the house off soooooooo fast. Then save what you morgage payment has been....

That's the ticket...you'll feel so much better getting out of that debt.
"Get out and STAY out!"

TnAndy · #7 09/02/10, 09:57 AM

Your husband is probably buying into the old, incorrect thinking that a mortgage is a good tax deduction.

It can be a deduction ( assuming you have enough to go over the standard deduction), but it's still foolish thinking to save 1 buck in taxes by paying 3 bucks in mortgage interest.....you're STILL OUT 2 bucks that would have fit in your pocket as well as a bankers.

Keep enough cash around for a good emergency fund in case employment goes, or the furnace dies....put the rest on the mortgage.

stifflej · #8 09/02/10, 09:59 AM

In a perfect world, putting the money into an interest bearing account would make sense if the interest rate was higher then the interest rate on your mortgage. But at the current rates, that is really hard to find. If you would do the math, you will actually come out ahead if you pay off mortgage and then save the house payment every month, even in a lower earning account. By making payments, you are putting more money in the banks pocket instead of yours...let the banks pay you, don't pay the banks, they have enough money.

momof2birds · #9 09/02/10, 09:59 AM

Quote:

Originally Posted by Txrider

Your hubby is nuts... The only reason that would make any sense at all is to keep a high credit score, but that is far from enough reason.

There is a line of logic that says if you can put that money somewhere where it draws more interest than the interest on your mortgage you are better off earning the interest, but that's not easy to find in this economy.

That said, I doubt I would put all 50k on the house if that's all I had and all I owed. I would put some back in an interest bearing account for an emergency fund and not touch it, and put the rest directly to principal on the mortgage.

If you have several thousand besides this 50k, then I would pay it off now.

A/ Bank interest is very small
B/ check out how many banks are shutting their doors every day! Scary.

ca2devri · #10 09/02/10, 10:05 AM

To pay off the house or not is an investment decision - hard to say one way or another, but if your not investment savvy, it's definitely not a bad thing to be mortgage free.

But you mean that he wants to put it in a safe in the basement? Now that IS crazy.

Chris

Jan Doling · #11 09/02/10, 10:06 AM

Tell hubby that was propaganda spread by mortgage companies. The little bit of interest being paid now is ridiculous....invest in your property and keep a good insurance policy. Having the mortgage paid off gives unparralled peace of mind.

Txrider · #12 09/02/10, 10:09 AM

Quote:

Originally Posted by momof2birds

B/ check out how many banks are shutting their doors every day! Scary.

But they are insured for deposits, it's no risk. And everyone should have a few months worth of income in savings they can get to for an emergency.

Outside that emergency fund, pay off the debt.

Narshalla · #13 09/02/10, 10:09 AM

I agree with the ones who said to check out Dave Ramsey.

Then, you'll probably end up putting a chunk aside as an emergency fund, and putting the rest towards the house.

Sparrow · #14 09/02/10, 10:12 AM

No brainer...pay off the mortgage. 50 grand won't go very far once you start taking a thousand here, a thousand there, a few hundred here, you'll nickel and dime the savings and you'll be broke in a year and still owe the mortgage, pay it off.

haypoint · #15 09/02/10, 10:16 AM

It is a complex question. There are the tax deductions from your income tax to consider. That's easy. A tax deduction is the government simply not making you pay taxes on the interest you pay banks. To save $300 on tax deductions, it costs $1000 in interest payments ( we aren't talking about the principal here).

If the housing market really crashed, your house's value slipped to less than the $50,000, you might want the cash in hand and walk away from it. I hope it never gets that bad, but worth a thought.

Putting $50,000 in a bank at 2% interest and paying the same bank 6% on a $50,000 morgage doesn't sound good either.

If this place can provide a garden big enough to feed the family all year, with some to sell and grow a meat source, pay it off and hunker down for the rough times ahead. As suggested, save the amount you were paying in morgage payments in a rainy day account.

Michael W. Smith · #16 09/02/10, 10:20 AM

Your husband isn't making any sense! Multiply the $50,000.00 by whatever the interest rate is and divide by 12. That will be close to how much interest you are paying the bank.

For example, if your mortgage rate is 6%: $50,000.00 X .06 = $3000.00 / year. Divide that by 12: $3000.00 divided by 12 = $250.00. You are paying the bank $250.00 / month in interest!! I'm sure there are other things you can do with that $250.00!

Your husband seems to think with the mortgage interest, it's taking money off your income taxes at tax time. While that may be true, it's still subtracting from money you would have had to begin with.

Pay it off and as said, keep making the "mortgage payment" into a new savings account and watch your savings grow!

wogglebug · #17 09/02/10, 10:21 AM

If you have money in the bank, and a mortgage, you/he can spend your money and never get out of debt. You/he can probably even use the mortgage as a line of credit and draw against it without significant further paperwork.

If you have the mortgage paid off, you/he can't spend/waste your assets unless you turn around and take out a new mortgage.

And NOT paying things off, NOT closing off the possibilities for going further into debt, NOT putting your money into solid assets rather than being able to spend it on useless frip-frap is supposed to be a good idea. HOW?

I'm not saying he's planning to do anything bad. I'm not even saying he would succumb to a momentary temptation and spend the money for a great deal on a shotgun, a boat, a 4WD, a mistress. BUT guys have done so. Better to lock it up in a paid-off mortgage, where it takes both your signatures to draw against the value.

But people do have a valid point about the value of having a little money as available cash, so that if everything collapses on you, you can still buy gas, rice and beans, or pay off the property tax.

ronbre · #18 09/02/10, 10:24 AM

always pay off your debt first..then you aren't throwing money away on interest..you will have such an overwhelming peace of mind

Haven · #19 09/02/10, 10:37 AM

Pay it off for sure.

My old boss used to say we were nuts for making double and triple payments on our home to pay it off asap. Her thought was that if you have all of your cash paid into your home and some tragedy happened, the hospital etc could come in and put a lean on your paid off house. Whatever.

The most important thing anyone can do is run an amortization table on your mortgage. The amount a home owner pays in INTEREST to the bank each year is often more than what goes into the principle.

Amortization tables are a real eye opener, and every home owner should run one: http://www.amortization-calc.com/

mightybooboo · #20 09/02/10, 10:46 AM

2 things IMO,pay of the roof over your head = security. No debt = security.

The argument a mortgage is a tax dodge is foolish,you are STILL paying for the honor of that tax 'break'

Though you can gamble prices are coming down,and that you can move to a better house cheaper,thats a real possibility . So is the possibility you wont have a job or inflation goes stratospheric,also a real chance.

Are you gamblers and risk takers?

Thats the situation as i evaluate it.